How a bunch of self-drive car rental startups is luring millennials to opt for renting over buying

If the self drive services are making the right bet, maybe the car you can afford to rent will be as much of a status symbol as the car you own is today.Rajiv Singh | ET Bureau | December 14, 2016, 11:32 IST

For Greg Moran, it always defied logic to buy a car. Reason: elementary maths. The numbers just don't add up. Consider this: While the average usage of a car in a year is less than 150 days, for another 200 days, it lies idle, depreciating in value and appreciating in cost due to maintenance. Add ever-increasing vehicular pollution in cities, choking congestion on arterial roads, and the financial burden of ownership, and the logic of not buying a car becomes apparent.

"A car is a high value, highly depreciating and highly underutilised asset," contends Moran, cofounder of Bangalore-based self-drive car rental company Zoomcar. It does not make sense to own them, particularly when people have smarter alternatives, adds Moran who started the company in February 2013.

Fast forward to December 2016. In little under four years, Zoomcar has got 1 million registered users, over 2300 vehicles and is present in 14 cities. In August this year, it raised its Series B funding of $24 million from a slew of investors including Ford Smart Mobility, a subsidiary of Ford Motor Company.

"Zoomcar has disrupted the personal car ownership market," he says. It offers cars on rent on an hourly, daily, weekly and monthly basis starting from `49 per hour for a Nano and going up to `250 per hour for a CLA class. "Cars are fast becoming a communal asset," says Moran. Younger working professionals, he points out, are increasingly choosing to rent cars for a month or two, instead of buying new ones as there's no hassle of EMI payments, maintenance or insurance. This also enables them to change models as and when they please, he adds.

It's not only Zoomcar that is zooming in on the massive business opportunity - an estimated `14 Billion market by 2020 - to cater to the population that swear by the utilitarian value of a vehicle.

A clutch of self-drive car rental startups such as Myles, Voler and Revv are changing the way people 'own' cars in India. Over the next few years, contend experts, the self-drive car rental segment will redefine the automobile landscape as more people move away from owning to renting.

"Car sharing and rentals are going to be defining features of the industry over the next few years," says Abdul Majeed, partner at PwC India. The young generation doesn't believe in owning a car. It believes in using it." This trend will continue to become sharper."

Sakshi Vij, the founder of self-drive car rental company Myles, agrees. Started in November 2013, Myles has a fleet of over 1,200 cars, claims 1.5 lakh users, clocks between 10,000-12,000 rentals per month, is present in 22 cities and is growing at 30% every month. Over the next year, Vij plans to take the fleet strength to 8,000, which means generating over 100,000 rentals per month. And if the immediate target sounds ambitious, have a look at the target for 2020: a fleet size of 50,000 cars in 50 cities spread over 5,000 locations; one Myles car every 400 meters in a city and 5 million new members. Can it be done? Vij sounds optimistic.

"More people now prefer to rent a car over buying one," she says. Myles offers cars for self-drive starting from ` 65 per hour for e2o, going up to Rs 9,500 per day for a Mercedes E class.

As per a study, says Vij, over 20 personal cars are replaced with every car added in a car sharing network. She believes with lesser cars bought, space in the cities can be better utilised and decongested. "A new culture in urban mobility is needed," she says, adding that Myles plans to foray into 100 cities in India. But can this new culture have resonance in a country like India? Experts think so.

The trend of shared ownership is growing, says Jessie Paul, founder of marketing advisory firm Paul Writer. Given that it is working even in the luxury market for yachts and private planes, there is ample potential for the model in India. Car-share growth, to a large extent, is driven by the convenience of a service and once it is 100% available and reliable, one will see a drop in car ownership, she adds.

Paul contends that rentals allow people to use the right vehicle for the right purpose, and with the rising trend of renting, one might actually see a drop in individual purchases of custom-purpose vehicles such as large SUVs. In cities with public transport, there would be more comfort in not owning a car, whereas in others it is more a substitute for a second vehicle, she adds.

Car ownership used to be a signifier of accomplishment and the industry's upgrade cycle roughly parallels the life of a consumer: from entry level hatchbacks to premium sedans. If the self drive services are making the right bet, maybe the car you can afford to rent will be as much of a status symbol as the car you own is today.